Seven most common errors of traders vol.2

Error 4. The purchase of the leaders of increase

To buy the recent leaders of increase is the same inadvertence as their sale. The interpretation of the behaviour of the leaders of increase is most frequently observed on the market. Prices do not can grow eternally, but there is no limit to this almost, therefore only what they require before the continuation of upward motion is “to be defended”.

But the problem is that this period can be sufficiently long extended to the weeks, therefore the effect from taking a long position will not be very large even if purchase was successful and trade always is located in the profitable zone.

Rules for avoiding of the error 4 are simple as never:
• Never hurry to engage the position of the leader of increase in the direction of trend if you see slowing of movement and recoil.
• Use stop warrants designed for the performance after the penetration of levels resistances.
• Buy with the limit warrant not earlier than the third impact about the support prevailing up to the current moment.

Error 5. The purchase of the leaders of drop

The purchase of the leaders of drop is smooth by nature sale of the leaders of increase. What can we expect from the shares or futures locating in the descending trend? Nothing except small correction. Often it is converted simply into the lateral trend, after prices continue to move downward. Again, to be successful in the trade during the correction is necessary to purchase by good support.

Therefore rules are following:
• Do not occupy long positions of the leaders of drop hoping for the strong correction because long positions will hardly be significant.
• Deal with the application of strategies calculated for the breakthrough.
• Longer lasts lateral of trend after strong price drop, there are more chances in the market to go below after breaking through support along the bottom edge of range.

Error 6. Sale of the leaders of drop

Again, this error is smooth to the error 4. It is not too easy to stop the leaders of drop because the market definitely has inertia, and even if it reached its objective bottom the residual motive power of bearish tendency is capable “of reaping” prices still below. The inaccuracy of the solution consists in the simple ineffectiveness of capital utilization. Lateral range can last for long time. The most critical point is the third impact about the base.

There are some rules to avoid the error 6:
• Never hurry to occupy a position of the leader of drop in the direction of trend if you see slowing of movement and restoration of prices.
• Use stop warrants calculated for taking a short position after the penetration of the levels of support.
• Sell with the limit warrant not earlier than the third impact about the resistance prevailing up to the current moment.

Error 7. Purchase of the past leaders of recently fallen increase

This error is the consequence of greediness of a trade novice. There is no secret that the trade novice frequently comes into the market after hearing about the super profits which were obtained from the phenomenal increase Internet companies.

After being introduced to the graphic analysis, this trader looks at such actions, as YHOO, AMZN, AMCC, JNPR, WCOM, LU, QCOM. Therefore it is obvious that the trade novice sees super profit. These sensations support a steady myth about “the prices always return”.

There are some rules to avoid the error 7:
• Never hurry to buy shares located in favour and now strongly fallen to those prices from where they began to grow.
• Examine shares only as short term trade.
• Buy with the limit warrant after overcoming of the nearest resistance and fastening of prices above it.

Undoubtedly, it is always necessary to remember about the stop warrant closing the transaction in the case of failure, if we do not use other tools ensuring the regulation of risk. It is necessary to use them more widely because on the market there are many mechanisms, among which options are most productive. There are a lot of options and they are well sold out.